Demand for PH bonds seen to rise

MANILA, Philippines–Demand for bonds that bear the word “Philippines” on it will be strong as investors race for an exposure to the country’s surging economy in any way they can.

But Moody’s Investor Service, a global rating firm, said the supply for Philippine-issued IOUs might remain tight even for hungry investors, noting that liquidity in the domestic economy was more than enough to meet local firms’ financing needs.

“Global investors are likely to exhibit strong appetite for Philippine paper on the back of the country’s strengthening macro fundamentals and a desire to diversify portfolios, which will support market conditions for prospective issuers,” Moody’s research analyst Rahul Ghosh said on Wednesday.

Illustrating the strong demand for Philippine IOUs, Moody’s said the government’s successful issuance of $2 billion in 25-year bonds was priced at a coupon of 3.95 percent, tighter than the initial guidance of 4.2 percent.

This was despite the broad-based increase in financial volatility observed in the region since the turn of the year, the rating firm said.

“Nevertheless, a sudden surge in new offshore issuance is unlikely given that domestic liquidity conditions remain broadly accommodative,” Ghosh said.

In its Inside Asean report, Moody’s said it expected an increase in the number of offshore bond issuances by local companies, which may choose to take advantage of investors’ appetite for securities from the Philippines.

Bond issuances may also rise as Philippine firms plan additional acquisitions of foreign firms—transactions that will need dollars or other currencies for funding.

“The Philippines’ macroeconomic credentials are strong,” Moody’s said. It cited the economy’s economic growth prospects, improving fiscal and government debt ratios and healthy external position—which were the main reasons for the successive credit-rating upgrades the country received.

In 2013, the Philippines won “investment grade” ratings for its sovereign debt from all major credit agencies, reflecting investors’ confidence in the country’s prospects.

“Given the improving sovereign rating trends and clear investor demand for the country’s paper, we believe that an increasing number of Philippine corporate issuance could look to the international markets to take advantage of favorable sentiment,” Moody’s said.